Algorithms and software for new theoretical techniques are being developed and characterized. Ongoing efforts in this area include: new methods for performing free energy perturbation calculation which allow connectivity to change and have a higher accuracy than existing methods, methods for treating solvent implicitly to provide for hydrophobic affects without the explicit inclusion of many water molecules, methods to properly treat electronic polarization in molecular dynamics simulations, and the development of a more accurate flexible water model. Projects include the analysis of hysteresis in free energy perturbation simulations, slow growth homology modeling, development of quantum mechanical potentials and appropriate simulation algorithms for use in molecular dynamics simulations, studies of excited state and electron transfer processes in biological systems, semiempirical HF calculations of proteins, new methods for long range truncation of the energy potential, and further refinement and examination of free energy techniques. Many of the parameter sets and models that are generally available are of the quality required for accurate simulation of macromolecular systems. Therefore, parameter development efforts are restricted to areas of primary interest where the existing parameter sets are inadequate. Ab initio chemistry, crystal simulations, vibrational analysis, solvated molecular dynamics simulations, and free energy simulations are being used in this efforts. One such example is in the development of parameters for simple organic substituents to use in modeling lipids. Projects include development of van der Waals parameters for methylene and methyl groups, development and use of a polarizable and flexible water model, molecular dynamics simulation studies of DNA: analysis of the parameter sets, and conversion of physical models into three-dimensional coordinates for computer analysis and simulation.